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BUSLAW 1 "Tropang Awit"

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Lea Lazaro

on 15 March 2013

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Transcript of BUSLAW 1 "Tropang Awit"

(Articles 1390 – 1402) Voidable Contracts Meaning of Voidable Contracts Voidable contracts are those which possess all the essential requisites of a valid contract but one of the parties is incapable of giving consent, or consent is vitiated* by mistake, violence, intimidation, undue influence, or fraud. Voidable VS. Void 1. Ratification means that one voluntarily adopts some defective or unauthorized act or contract which without his subsequent approval or consent, would not be binding on him.

2. Ratification cleanses the contract from all its defects from the moment it was constituted. The contract thus becomes valid. Hence, the action to annul is extinguished. Meaning and effect of Ratification Who may ratify?
•A contract entered into by an incapacitated person may be ratified by:
a. the guardian
b. the injured party himself provided he is already capacitated

As legal representative of their wards, guardians have the power to contract on their behalf. Hence, they may also ratify contract entered into by their wards.

•In case the contract is voidable on the ground of mistake, violence, intimidation, undue influence or fraud, ratification can be made by the party whose consent is vitiated. Rights of the Parties • The right of action is based upon incapacity of any one of the contracting parties, the rule is still the same. *Vitiated means to make faulty or defective or to make ineffective. What are some Examples of Void and Voidable Contracts? Void contracts are unenforceable by law: even if one party breaches the agreement, damages cannot be recovered since basically there was no valid contract. Some examples of void contracts include:
• Contracts for illegal subject matters such as gambling, prostitution, or the execution of crimes.
• Contracts made by incompetent parties who do not have the legal capacity to make decisions (such as mentally disabled persons or some minors)
•Contracts that were not supported by adequate consideration, or where the consideration was unlawful.
• Contracts for the performance of impossible acts.

Voidable contracts are valid agreements, but the unbound party can “elect to disaffirm” the contract. Performance will still be forthcoming for the other party. Some common examples of voidable contracts include: Binding force of voidable contracts They are valid and binding between parties unless annulled by a proper action in court. Once ratified, they become absolutely valid and can no longer be annulled. Kinds of voidable contracts A contract is voidable if the defect is caused by either:

1. Legal incapacity to give consent, where one of the parties is incapable of giving consent to the contract; or

2. Violation of consent, where the vitiation is done by mistake, violence, intimidation, undue influence or fraud. Meaning of Annulment Annulment is a remedy provided by law, for reason of public interest, for the declaration of the inefficacy* of a contract based on a defect or vice in the consent of one of the contracting parties in order to restore them to their original position in which they were before the contract was executed. *Inefficacy means lack of power to produce a desired effect. Period for filing action for annulment The four-year period for bringing an action for annulment of a voidable contract is reckoned:

1. In cases of intimidation, violence, or undue influence, from the time the intimidation, etc. ceases. Before that time, the consent is still vitiated and, therefore, the victim cannot be expected to bring an action in court.

2. In case of mistake or fraud, from the time it is discovered. This must be so because before the time of discovery, the innocent party is unaware of the reason which renders the contract voidable (Art. 1393) and cannot also be expected to bring an action in court. Furthermore, the guilty party should not be rewarded for successfully hiding the mistake or fraud.

3. In the case of contracts entered into by minors or incapacitated persons, from the time the guardianship ceases. An incapacitated person has no capacity to sue. Kinds of Ratification They are:

1. Express - when the ratification is manifested in words or in writing; or

2. Implied or tacit - it may take diverse forms, such as by silence or acquiescence;* by acts showing adoption or approval of the contract; or by acceptance and retention of benefits flowing therefrom.** *Acquiescence means to accept, comply, or submit an implication but not actually expressed or passively.
**Therefrom means from that or it. Requisites of Ratification 1. The requisites for implied ratification are the following:
a. There must be knowledge of the reason which renders the contract voidable;
b. Such reason must have ceased; and
c. The injured party must have executed an act which necessarily implies an intention to waive his right.

2. The requisites for express ratification are the same as those for implied ratification except that the former is effected expressly. Conformity of guilty party to ratification not required. Ratification is unilateral act by which a party waives the defect in his consent. The consent of the guilty party is not required; otherwise, he can conveniently disregard his contract by the simple expedient of refusing to give his conformity. Effect of Ratification Retroactive It cleanses the contract from all its defects from the moment it was excuted (Art. 1396) Guilty party without right to bring action The guilty party, including his successor in interest, cannot ask for annulment. This rule is sustained by the principle that he who comes to court must come with clean hands. Duty of mutual restitution upon annulment 1. If the contract is annulled, the parties, as a general rule, must restore to each other:
a.Subject matter of the contract with its fruits
b.The price thereof with legal interest

2. In personal obligations there are service had already been rendered, the value thereof with the corresponding interest, is the basis for damages recovered from
the party benefited by the service. Meaning of Remedy A legal means of enforcing a right of correcting wrong.

If you are the injured party, you have three options:
• Accept the breach.
• Sue for money damages.
• Ask the court for an equitable remedy. Equitable Remedies • Ask the court to order the other party to do what he/she had agreed to do in the contract.
• Only used when money damages are not sufficient enough to give relief subject matter is rare unique. Injuction A court order that prevents a party from performing specific act.
• Only available in special circumstances
• Temporary or permanent
• One who disobeys is in contempt of court. Extinguishment of action for annulment • If the lost is not due to his fault or fraud.
• The action for annulment shall be extinguished only if the loss is through the fault of fraud of the plaintiff. Effect where a party cannot restore what he is bound to return. When a contract to annulled, a reciprocal obligation of restitution is created. The return by one party of what he is obliged to restore by the decree of annulment may be regarded as a condition to the fulfillment by the other of what is incumbent upon him. While a void contract may meet any of the following criteria:
1. It is illegal from the moment it is made.
2. It is legal but declared null by the courts because it violates a fundamental principle such as fairness, or is contrary to public policy.
3. It becomes void due to changes in law or in government policy; or
4. It has been fully performed.
Lack of capacity to contract (such as arises from being an infant or minor, intoxicated, or insane) automatically makes a contract void. A contract that is void only in one or few parts may be saved by the process of severance. Not to be confused with voidable contract.
A contract that has legal effect and force when it is made, but is liable to be subsequently annulled or set aside by the courts through the process of rescission.Circumstances or features that make a contract voidable include:
1. Non-disclosure of one or more material facts.
2. Misrepresentation
3. Mutual mistake
4.Lack of free will of a contracting party, or presence of one contracting party's undue influence over the other; and
5.A material breach of the terms of the contract. A contract that is voidable in only one or few parts may be saved by the process of severance. Not to be confused with void contract.
• Contracts where one party was of minor age (they may elect to disaffirm the contract once they reach the age of majority; if the other party is an adult, they will usually be bound to perform)
• Contracts which were made under conditions of duress.
• Contracts involving fraud in the inducement.
• Contracts which where one party was incapacitated, such as situations involving intoxication or insanity. What? How? Void??? Voidable? ?!?!?!?!?! by "Tropang Awit"
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